Benchmark is reiterating their Buy rating on shares of Google (NASDAQ: GOOG) as they raise their 2011 estimates to account for stronger search advertising than they previously expected.

The firm is raising their 1Q11 EPS estimate to $8.17 from $7.79 and their 2011 estimate to $34.77 from $33.43. They report that the increase id due to their checks that indicate double digit cost per click growth. They are maintaining their price target of $700.

Benchmark comments that shares of GOOG are well undervalued as they are trading flat compared to March of 2010 while the NASDAQ has experienced a 10% increase. They also state that the company has beaten the streets estimates four quarter in a row now.

The U.S. search market is growing at 12% y/y due to increased CPC and the Efficient Frontier has reported February CPC growth rates for travel, auto, and
finance of 18%, 16% and 15%, with retail relatively flat y/y. GOOG controls 90% of the European market share in search and Benchmark states that international search is growing about 15% y/y, with some of the most progress coming from Europe.

The firm reports that, "We remain concerned about expense growth, and the drag on earnings from the inefficient hoarding of cash. The recent spike in expenses was likely related to the appointment of new CEO Larry Page. With Google competing on several fronts against deep-pocketed competitors, we fear Page will be less financially disciplined than his predecessor. Our current estimates reflect a flat EBITDA margin from 2010 to 2011 at 44.6%, but that is down 2 percentage points from 2009."